Part a. facts: Gibson acquired interest in Keller 1/1/2014 Various considerations given for acquisition Fair value of noncontrolling interest at acquisition Keller\'s book value Value assigned to Keller customer list Keller customer list- life for purposes of amortization Book value of land Gibson sold to Keller on 1/2/2014 60% S 570,000 $ 380,000 $ 850,000 $ 100,000 20 $ 60,000 $ 100,000 Price paid by Keller for Gibson\'s land Cost of inventory shipped by Keller to Gibson in 2014 S 100,000 Price paid by Gibson for 2014 inventory Cost of intra-entity shipments by Keller to Gibson in 2015 $140,000 Price paid by Gibson for 2015 intra-entity shipments Percentage of inventory resold in period following transfer Amount Gibson owes Keller at end of 2015 S 150,000 S 200,000 20% S 40,000 Part b. facts: Building sold to Keller instead of land Book value of building Gibson sold to Keller Price paid by Keller for Gibson building Cost of building Remaining life at date of transfer $ 60,000 $ 100,000 S 140,000 10 Gibson Keller Sales Cost of goods sold Operating expenses Equity in earnings of Keller Company Company Company S (800,000) S (500,000) 800,000 60,000 500,000 100,000 Net income S (284,000) $ (140,000) Retained earnings, 1/1/15 S(1,116,000) S (620,000) Solution Consideration transferred ............................................... $570,000 Noncontrolling interest fair value........................ 380,000 Subsidiary fair value at acquisition-date .......... $950,000 Book value................................................................. (850,000) Fair value in excess of book value ..................... $100,000Remaining Annual Excess Excess fair value assignment ........................ Life Amortization to customer list................................................... 100,000 20 yrs. $5,000 -0- a. CONSOLIDATION ENTRIES Entry *TL Retained earnings, 1/1/15 (Gibson) ........................ 40,000 Land ................................................................... 40,000 To remove unrealized gain on Intra-entity downstream transfer of land made in 2014. Entry *G Retained earnings, 1/1/15 (Keller) .................... 10,000 Cost of goods sold ........................................ 10,000 To defer unrealized upstream Inventory gross profit from 2014 until 2015 computed as the 2014 ending inventory balance of $30,000 (20% × $150,000) multiplied by 33?1/3% gross profit rate ($50,000 ÷ $150,000). Entry *C Retained earnings, 1/1/15 (Gibson) ................. 9,000 Investment in Keller ....................................... 9,000 Parent is applying the partial equity method as can be seen by the amount in the Equity in earnings of Keller Company account (60 percent of the reported balance). Entry S Common stock (Keller) ....................................... 320,000 Additional paid-in capital ................................... 90,000 Retained earnings, 1/1/15 (Keller) (adjusted for Entry *G) ..............................................

1. Part a. facts: Gibson acquired interest in Keller 1/1/2014 Various considerations given for
acquisition Fair value of noncontrolling interest at acquisition Keller's book value Value
assigned to Keller customer list Keller customer list- life for purposes of amortization Book
value of land Gibson sold to Keller on 1/2/2014 60% S 570,000 $ 380,000 $ 850,000 $ 100,000
20 $ 60,000 $ 100,000 Price paid by Keller for Gibson's land Cost of inventory shipped by
Keller to Gibson in 2014 S 100,000 Price paid by Gibson for 2014 inventory Cost of intra-entity
shipments by Keller to Gibson in 2015 $140,000 Price paid by Gibson for 2015 intra-entity
shipments Percentage of inventory resold in period following transfer Amount Gibson owes
Keller at end of 2015 S 150,000 S 200,000 20% S 40,000 Part b. facts: Building sold to Keller
instead of land Book value of building Gibson sold to Keller Price paid by Keller for Gibson
building Cost of building Remaining life at date of transfer $ 60,000 $ 100,000 S 140,000 10
Gibson Keller Sales Cost of goods sold Operating expenses Equity in earnings of Keller
Company Company Company S (800,000) S (500,000) 800,000 60,000 500,000 100,000 Net
income S (284,000) $ (140,000) Retained earnings, 1/1/15 S(1,116,000) S (620,000)
Solution
Consideration transferred ............................................... $570,000
Noncontrolling interest fair value........................ 380,000
Subsidiary fair value at acquisition-date .......... $950,000
Book value................................................................. (850,000)
Fair value in excess of book value ..................... $100,000Remaining Annual Excess
Excess fair value assignment ........................ Life Amortization
to customer list................................................... 100,000 20 yrs. $5,000
-0-
a. CONSOLIDATION ENTRIES
Entry *TL
Retained earnings, 1/1/15 (Gibson) ........................ 40,000
Land ................................................................... 40,000
To remove unrealized gain on Intra-entity downstream transfer of land made in 2014.
Entry *G
Retained earnings, 1/1/15 (Keller) .................... 10,000
Cost of goods sold ........................................ 10,000
To defer unrealized upstream Inventory gross profit from 2014 until 2015 computed as
the 2014 ending inventory balance of $30,000 (20% × $150,000) multiplied by 33?1/3% gross

2. profit rate ($50,000 ÷ $150,000).
Entry *C
Retained earnings, 1/1/15 (Gibson) ................. 9,000
Investment in Keller ....................................... 9,000
Parent is applying the partial equity method as can be seen by the amount in the
Equity in earnings of Keller Company account (60 percent of the reported balance).
Entry S
Common stock (Keller) ....................................... 320,000
Additional paid-in capital ................................... 90,000
Retained earnings, 1/1/15 (Keller) (adjusted
for Entry *G) ..................................................... 610,000
Investment in Keller (60%) ..................... 612,000
Noncontrolling interest in Keller, 1/1/15 (40%) 408,000
To remove stockholders' equity accounts of Keller and recognize beginning
noncontrolling interest. Retained earnings balance has been adjusted in Entry *G.
Entry A
Customer list.......................................................... 95,000
Investment in Keller ....................................... 57,000
Noncontrolling interest in Keller, 1/1/15 (40%) 38,000
To recognize amount paid within acquisition price for the customer list. Original balance
is adjusted for previous year’s amortization.
Entry I
Equity in earnings of Keller ............................... 84,000
Investment in Keller ....................................... 84,000
To eliminate intra-entity income accrual.
Entry D
Investment in Keller ............................................. 36,000
Dividends declared ....................................... 36,000
To eliminate intra-entity (60%) dividend transfers.

3. Entry E
Amortization expense.......................................... 5,000
Customer list ................................................... 5,000
To recognize current period excess amortization expense.
Entry P
Liabilities................................................................. 40,000
Accounts receivable ..................................... 40,000
To eliminate intra-entity debt.
Entry Tl
Sales......................................................................... 200,000
Cost of goods sold ........................................ 200,000
To eliminate current year intra-entity inventory transfer
Entry G
Cost of goods sold .............................................. 12,000
Inventory........................................................... 12,000
To defer 2015 unrealized inventory gross profit. Unrealized gain is the ending inventory
of $40,000 (20% of $200,000) multiplied by 30% gross profit rate ($60,000 ÷ $200,000).
Net income attributable to noncontrolling interest
Keller reported net income ............................................................... $140,000
Excess fair value amortization ......................................................... (5,000)
2014 Intra-entity gross profit realized in 2015 (inventory).......... 10,000
2015 Intra-entity gross profit deferred (inventory) ...................... (12,000)
Keller realized net income 2015........................................................ $133,000
Outside ownership percentage ....................................................... 40%
Net income attributable to noncontrolling interest ............... $ 53,200
GIBSON AND KELLER
Consolidation Worksheet
Year Ending December 31, 2015
Consolidation Entries Noncontrolling Consolidated
Accounts Gibson Keller Debit Credit
Interest Totals

4. Sales (800,000) (500,000) (TI)
200,000 (1,100,000)
Cost of goods sold 500,000 300,000 (G) 12,000 (*G)
10,000 602,000
(TI) 200,000
Operating expenses 100,000 60,000 (E)
5,000 165,000
Equity in earnings of Keller (84,000) -0- (I)
84,000 -0-
Separate company net net income (284,000) (140,000)
Consolidated net income
(333,000)
To noncontrolling interest
(53,200) 53,200
To Gibson
Company
(279,800)
RE, 1/1—Gibson (1,116,000) (*TL)
40,000 (1,067,000)
(*C) 9,000
RE, 1/1—Keller (620,000) (*G) 10,000
(S) 610,000
Net income (above) (284,000)
(140,000) (279,800)
Dividends declared 115,000 60,000 (D) 36,000
24,000 115,000
Retained earnings, 12/31 (1,285,000)
(700,000) (1,231,800)
Cash 177,000
90,000 267,000
Accounts receivable 356,000 410,000 (P)
40,000 726,000
Inventory 440,000 320,000 (G)
12,000 748,000
Investment in Keller 726,000 (D) 36,000 (*C)
9,000 -0-

5. (S) 612,000
(I) 84,000
(A) 57,000
Land 180,000 390,000 (*TL)
40,000 530,000
Buildings and equipment (net) 496,000
300,000 796,000
Customer list -0- -0- (A) 95,000 (E)
5,000 90,000
Total assets 2,375,0001,510,0003,157,000
Liabilities (480,000) (400,000) (P)
40,000 (840,000)
Common stock (610,000) (320,000) (S)
320,000 (610,000)
Additional paid-in capital (90,000) (S)
90,000
Retained earnings, 12/31 (1,285,000)
(700,000) (1,231,800)
NCI in Keller, 1/1 (S)
408,000 (408,000)
(A)
38,000 (38,000)
NCIIn Keller, 12/31
(475,200) (475,200)
Total liabilities and equity (2,375,000)
(1,510,000)1,551,0001,551,000 (3,157,000)
b.
Entry *TA
Retained earnings, 1/1/15 (Gibson) ................. 36,000
Buildings ................................................................ 40,000
Accumulated depreciation .......................... 76,000
To defer unrealized gain ($40,000 original amount less one year of excess
depreciation at $4,000 per year) as of beginning of year.
Entry *TA (Alternative)
Retained earnings, 1/1/15 (Gibson) ................. 36,000

6. Buildings (net) ................................................ 36,000
Entry ED
Accumulated depreciation ................................ 4,000
Operating (or depreciation) expense ........ 4,000
To remove excess depreciation for current year created by transfer price.